Amazon to collect Texas sales tax in July, Nevada in 2014

By on April 30, 2012, 4:00 PM

Amazon has reached an agreement with the state of Texas which will allow them to continue doing business there but at a cost -- Amazon will begin collecting sales tax from Texas residents starting July 1, 2012. Texas is the seventh state thus far to make such a requirement. Just last week, Amazon struck a similar deal with Nevada, a deal which is slated to take effect on January 1, 2014. The other five states where Amazon is required to collect sales tax are currently Kansas, Kentucky, New York, North Dakota and Washington. 

A while back, Amazon shut down its Texas distribution center after the state controller sent the company a bill for $269 million. That intimidating figure, according to the state, was the total amount of sales tax due between 2005 and 2009.

After a series of lengthy talks, Amazon reached an agreement where it will be forced to collect sales tax from Texas residents, but manages to avoid paying those $290 million in back-taxes. As part of the deal, Amazon must also create 2,500 jobs within the state, presumably by reopening its fulfillment operations.

How has Amazon managed to dodge paying sales tax in so many states for so long? It has been generally accepted that state sales tax is required only of businesses who operate within the state. When it comes to Internet and mail order transactions, purchases are often done across state lines and the actual, physical presence of the company is elsewhere. Laws vary from state to state, but federal law does empower states to collect sales tax from Amazon if they have any retail stores or distribution centers within their borders. If Amazon doesn't have a store or warehouse within the state, then Amazon may not be required to collect sales tax.

Frustrated with missing out on their cut of Internet sales though, some states like California have already instituted a separate tax to cover Internet transactions. In California, it's called a use tax. Each year (or quarterly), CA residents are expected to report the gross total of their Internet purchases. Those residents then pay the equivalent to sales tax, as if they had purchased them from a CA vendor. Internet purchases which charge the consumer some form of state sales tax are exempt from being reported.

User Comments: 8

Got something to say? Post a comment
Raswan Raswan said:

yeah, California, if you're operating on the basis that you are happy with whatever you can con CA residents into reporting, be happy with that 1% who you've scared into complying with that bs law.

gwailo247, TechSpot Chancellor, said:

I wouldn't be surprised if the costs of educating the public, enforcing compliance and carrying out the auditing and punishment of "criminals" end up being more than the revenue collected.

ikesmasher said:

Shopping on the web will lose its appeal because of greedy governments and officials. Taxes are a huge reason why i buy anything off the internet, if not THE reason.

Guest said:

Uhm... Califirnia is not alone in "use tax" laws. 45 other states share the view that sales tax due, if not collected by the retailer, must be remitted directly by the consumer. Laws on the books for more than 50 years in most states.

Hopefully Congress will finally get involved and fix this imbalance -that local retailers must collect, while remote retailers can ignore the sales tax collection issue because 45 years ago the Supreme Court thought it would be too difficult - clearly it is not today.

Tygerstrike said:

Well in one aspect, this might help our economic growth. It will no longer make internet purchases so cheap and might help the brick and mortar stores in your very own town/city. I can understand looking for a cheaper price, but in doing so business is taken from the city in which you live, it may even be taking business from YOUR job. And when business can't make money they fire ppl.

Guest said:

Article is wrong, Amazon starts collecting sales tax in Texas on July 1, 2012. That's according to the 10-Q Amazon filed with the SEC on April 27th. From the 10-Q -

""While we continue to believe the assessment was without merit, in April 2012, we entered into a settlement with the State of Texas that included an agreement to collect sales taxes on applicable sales transactions for our U.S.-focused internet retailers beginning July 1, 2012, resolution of Texas sales taxes up to that date, certain commitments related to capital investment and job creation in the state, and an immaterial payment to the state,"

Rick Rick, TechSpot Staff, said:

Article is wrong, Amazon starts collecting sales tax in Texas on July 1, 2012. That's according to the 10-Q Amazon filed with the SEC on April 27th. From the 10-Q -

That is a significant mistake... Thanks for letting us know.

Guest said:

Um... read the title. It clearly states that taxes in Texas WILL be in July. :oops:

Load all comments...

Add New Comment

TechSpot Members
Login or sign up for free,
it takes about 30 seconds.
You may also...
Get complete access to the TechSpot community. Join thousands of technology enthusiasts that contribute and share knowledge in our forum. Get a private inbox, upload your own photo gallery and more.